Homeownership is on the decline in New York City. With more than 65% of New Yorkers paying rent each month, it seems like the American Dream may be dead in the Big Apple.
But New York actually offers more options to homeownership than other American hotspots. Between condos, co-ops, multi-family homes, and single-family homes, there’s something for every real estate palette in NYC.
Should you buy vs rent in NYC? Ask yourself the following five questions so you can make the decision that’s best for you.
5 Questions to help decide: Should You Rent or Buy in NYC?
1. Do I know all the hidden costs of homeownership?
As a homeowner, you know you’ll be responsible for mortgage payments (principal and interest payments, hoa fees, maintenance fees, property taxes, and insurance premiums. But there are often hidden costs to owning a home that not everyone takes into consideration when determining their budget. Potential unforeseen costs could include:
- Broken appliances
- Exterior home repairs (roof, deck, driveway)
- Structural maintenance and upgrades (windows, doors, trim)
- Cosmetic work
- Emergencies (busted pipes, electrical repairs)
If your budget is already stretched, unexpected repairs can make home ownership seem like a never-ending money pit.
For renters in New York, maintenance, upgrades, and emergencies aren’t so scary. Landlords are required to make any repairs in a New York residence that affect a tenant’s health, safety, or expectations.
There are still additional costs to consider with renting, like renters insurance. But compared to homeownership, surprise costs are typically minimal.
2. How long am I staying?
It’s impossible to know the future. But if you have an idea of how long you plan on staying in New York, this could help you decide if renting or buying makes more sense.
Let’s say you plan on staying in New York for a couple of years before moving on to your next destination. The average New York apartment rents out for $3,477, which adds up to $83,448 over 24 months. It seems like a decent chunk of change until you consider the average New York home is over $670,000.
Of course, buying is an investment while renting often leaves you with nothing to show. Though there are an incredible number of financial variables to consider, the longer you plan on staying, the more financial sense it makes to buy. (FYI – The average New York homeowner stays put for 18 years.)
But if the idea of going through a closing as a buyer and then again as a seller in under a couple of years makes you nauseous, renting could be the better option for you.
3. What is my budget?
This is obviously an important question to answer when trying to decide if you should buy or rent in New York. At the end of the day, it really does come down to what you can comfortably afford.
How do you figure that magic number out? It’s complicated, and it also doesn’t help that the cost of living is 22% higher in New York than the national average.
When buying a home, you need to make sure you have enough for the down payment, closing costs, insurance, and other small costs that can quickly add up. You’ll also need an emergency fund before moving in. Emergencies don’t wait for you to be financially prepared.
Let’s say you want to purchase a $400,000 home. You’ll need:
- A 20% down payment of $80,000 (unless you qualify for an FHA loan).
- To be prepared to make monthly mortgage payments of roughly $1,500, depending on your interest rate and loan length.
- Reserved funds for closing costs (typically around $5,000 in New York).
- An emergency fund with at least three (preferably six or more) months’ living expenses.
In order to buy a home in NYC, you’ll likely need a savings of at least $100,000.
If your bank account is on the lighter side, renting helps you avoid those large upfront costs. You will have to consider application fees, security and pet deposits, moving costs, and renters insurance, but all are on the lower end of the housing cost spectrum in New York.
4. What are my goals?
Is homeownership your goal? Be honest with yourself. It’s not right for everyone and rushing into a big purchase because you feel like you have to isn’t responsible. But what is responsible is taking control of your money and conquering your financial goals, whatever they may be.
Do you want to pay off your student debt or credit card bills? Focus on that first. Do you want to travel? Spend your money on a plane ticket. Do you want to start building a nest egg? Homeownership isn’t the only way to prepare for retirement.
But if your goals are focused on setting down roots and having a place to call your own, then homeownership could be the way to go.
5. How will my decision affect my lifestyle?
Do you want more freedom or more stability? Do you want to change the wallpaper whenever you feel like it or can you handle a quirky style for less financial risk?
Homeownership offers freedom of choice, pride of ownership, and financial gain. Renting offers convenience, flexibility, and short-term commitment with less overall stress.
Should You Rent or Buy in NYC?
Hopefully, our five questions have helped you weigh your options and come closer to a final decision.
In the end, the decision is as much a personal as it is financial. Your heart (and bank account) will know which is right for you.